Analysis: Curve founder's position in Frax Finance will bring greater risks to CRV, and even trigger a chain reaction of DeFi

According to PANews on August 1, Delphi Digital, an encryption investment research institution, stated on Twitter that Curve founder Michael Egorov has 59 million CRV collateral and 15.8 million FRAX debt positions on Frax Finance, although this is higher than his Aave. The position is much smaller, but because of Fraxlend's time-weighted variable rate, it poses more risk to CRV.

According to the analysis, when the utilization rate of Fraxlend is 100%, the interest rate will double every 12 hours, and it is 81.2% as of press time (about 1 hour ago). It is expected to rise to a maximum of nearly 10,000% APY in 3.5 days. Regardless of the CRV price, this super high rate may eventually lead to Michael being liquidated eventually. In the case of a maximum LTV of 75%, the position liquidation price will reach 0.517 CRV/FRAX within 4.5 days, and the current price can be touched by less than 10% drop. Michael has tried twice to reduce the debt and utilization rate, repaying 4 million FRAX in the last 24 hours, but the market utilization rate remains at 100%, because once he repays, users will rush to withdraw liquidity. With such a large position at risk, these liquidation risky positions pose serious concerns for CRV prices, given the low liquidity that exists. If this 8-figure position size liquidates, CRV prices could drop to extremely low levels, with knock-on effects for a large portion of the DeFi ecosystem.